MercoPress. South Atlantic News Agency

Argentina and Brazil admit trade disagreements between Mercosur main partners

Timerman acknowledged trade between the two countries needs some “fine-tuning”, but for Argentina Brazil is its “most strategic partner.”

Argentina and Brazil failed to reach an agreement to help unlock the ongoing tension between the two key Mercosur allies over bilateral trade. Argentina's Hector Timerman and his counterpart Mauro Vieira met in Buenos Aires to try and ease Brazil’s growing concerns about restrictions on the flow of goods, but any decisions were pushed forward to an undetermined date.

 Timerman acknowledged that trade between the two countries needs some “fine-tuning”, although he was full of warm words for the neighboring country, saying Argentina considered Brazil its “most strategic partner.”

Despite these lofty words, the two sides were only able to agree to a “meeting in the next few weeks at deputy-ministerial level to deal with the economic issues surrounding our relationship.”

Sources close to the meeting said the now-infamous Argentine (sworn declaration) DJAI import permit was the main stumbling-block of the meeting.

During the meeting, Timerman was joined by some of the country’s top economic officials, including Economy Minister Axel Kicillof, Federal Planning Minister Julio De Vido, Cabinet Chief Jorge Capitanich and Industry Minister Debora Giorgi.

Before the trip, Brazil’s Development Minister Armando Monteiro said there’s “discomfort” with Argentina because of the “steeper controls on imports through affidavits” and the “difficulties buying foreign currency.”

Brazil’s concerns were backed by the Argentine Chamber of Commerce (CAC), which issued a report stating that trade within Mercosur was down 10.6% in the first three quarters of 2014.

The report highlighted Argentina’s outsized role in that decline, pointing that the country’s activity inside the trade bloc had declined 16.3% in the third quarter of 2014. According to the CAC, this meant that the trade bloc was “losing relevance,” failing to accomplish its stated goal of increasing regional trade.

Imports from Brazil to Argentina decreased 25% last year, according to the INDEC statistics bureau.

Brazil’s concern over securing exports to Argentina came amid a continued decline of the value of its currency, as the Real hit a new record-low, falling to 2.87 Reais to the dollar, its weakest position in more than 10 years.

Ongoing concerns about the deterioration of Brazil’s economy, combined with expectations of higher US interest rates, have contributed to the Real’s roughly seven percent fall since the beginning of February.

In reply to concerns about the increased ties with China leading to a reduced focus on the Mercosur trade bloc, both Foreign ministers agreed this was not the case.

“A strategic relationship with Argentina doesn’t exclude other countries,” Vieira said. “The relationship with China is open and intense in all countries in the region.”

China’s growing role in Mercosur countries was instead seen as another factor tying its members together. “I don’t think the deal with China goes against the Mercosur,” Timerman said, “it actually strengthens it.”